5
______
REPORT OFTHE CITY TREASURER
______
TOBUDGET SCRUTINY COMMITTEE
ON WEDNESDAY, 7TH DECEMBER, 2011
______
TITLE:REVENUE BUDGET 2012/13
______
RECOMMENDATION:Members are invited to comment on the progress with preparations for the revenue budget 2012/13
______
EXECUTIVE SUMMARY:This report updates members with progress in developing budget proposals for 2012/13.
______
BACKGROUND DOCUMENTS:(Not available for public inspection)
______
KEY DECISION:NO
______
DETAILS:See later
______
KEY COUNCIL POLICIES:Budget Strategy
______
EQUALITY IMPACT ASSESSMENT AND IMPLICATIONS:
These will be undertaken as part of the consultation processfor all savings proposals.
______
ASSESSMENT OF RISK:Risk is fully considered in developing the annual budget proposals and a detailed risk assessment of reserves will form part of the risk assessment in determining the 2012/13 revenue budget.
______
SOURCE OF FUNDING:Revenue Budget
______
LEGAL IMPLICATIONS :Not applicable at this stage, but consideration of the legal implications will be an integral part of the process for determining the revenue budget.
______
FINANCIAL IMPLICATIONS : are contained within this report and have been considered by the City Treasurer and his staff.
______
OTHER DIRECTORATES CONSULTED:All directorates are fully consulted in the preparation of the revenue budget.
______
CONTACT OFFICER:John SpinkTEL. NO.793 3230
______
WARD(S) TO WHICH REPORT RELATE(S):Potentially all
______
REPORT DETAILS
1. INTRODUCTION
It has been previously identified that savings in the region of £18m would be required to balance the 2012/13 revenue budget.
This assessment of required savings was originally outlined in the Budget Report to Council on 2nd March 2011 when the 2011/12 revenue budget was approved, and an extract fromthe future prospects section of that report is set out below.
Resources Available
£m
Council Tax+ 2.5% on 2011/12 95.3
Formula Grant125.1
Specific GrantsEarly Intervention Grant13.3
HB/CTB Admin Subsidy 2.7
Preventing Homelessness 0.2
Council Tax Freeze Grant 2.3
Learning Difficulties Grant 7.3
NHS Social Care Grant 3.5
------29.3
------
249.7
Spending Requirement
Base Budget (Revenue Spending Power)258.0
Adjustments for Commitments – BSF, Greengate 2.9
Capital Financing 3.8
Inflation 8.5
Early pension costs (£4m to be spread over 3 years) 1.3
------
274.5
Less : Savings – full year effect from 2011/12 budget- 6.7
------267.8
Less : Resources Available-249.7
------
Further Savings to find- 18.1
======
Since last March, Budget and Efficiency Cabinet Working Group (B & EG) has been working with lead and executive support members and strategic directors to identify how this savings target can be met.
2. CURRENT POSITION
2.1 Initial Savings Options
During the summer strategic directors were requested to identify options for savings. Other adjustments have been made to the budget projection as information has become more certain.
The following table summarises the position reached by B & EG after consideration of the first round of savings options from strategic directors and other adjustments in budget assumptions.
Savings Required£m
Original savings required / 18.183
Adjustments agreed at B & EG
Add : Children’s Services overspend – children in care - outside placements/agency foster carers / 2.000
Less : 2012/13 accepted new efficiencies / - 5.175
New Homes Bonus 2011/12 – use of unallocated amount / - 1.016
New Homes Bonus 2012/13 – allocation yet to be confirmed by CLG / - 2.000
Transport Levy at 0% - needs to be confirmed by AGMA / - 1.061
Council Tax – anticipate income from further new dwellings / - 0.500
Capital Financing – savings from reduced interest rates / - 1.750
Current position - updated savings required / 8.681
2.2 Further Savings Options
Further consideration has been given to where savings options may be sought to bridging the balance still required. This has involved consideration by B & EG of an analysis by strategic directors of which of their services statutorily need to be provided, and at what level, and which are discretionary, where some choice may be exercised over whether the service is provided at its current level or not at all.
(a)Further options for savings targets from directorates
The first set of options follow the review of statutory and discretionary services that has been undertaken over the last few weeks and relate to the further savings targets that have been set for strategic directors to report back on how their targets can be delivered and what would be the implications.
If the targets set for all directorates can be fully delivered then the following further savings can be made :-
Further options for savings targets from directorates / £m- Children’s Services (reduce £2m additional requirement to £1m) / - 1.000
- Customer & Support Services/Office of Chief Exec – reduce Skills and Work / - 0.500
- Community Health & Social Care / - 1.000
- Environment & Community Safety / - 0.500
- Sustainable Regeneration / - 1.000
Updated savings required / 4.681
The final details of how these savings targets can be delivered are currently being considered by B & EG, but it is expected that all directorates will identify appropriate savings that will fully deliver them.
(b) Other possible options
To achieve the final savings requirement of £4.681m, assuming all options above prove to be acceptable, further options that are being explored essentially fall into two categories :-
Further service or structural reductions
Workforce reforms
Appropriate choices need to be made when lead members and strategic directors have reported back to B & EG in the next few weeks. Consultation has been launched with the trades unions concerning the possible options for workforce reforms.
3 OTHER FACTORS THAT NEED TO BE CONSIDERED
3.12011/12 Budget Position
Regard needs to be given to what the final expected revenue outturn position will be for 2011/12 and what effect that may have, or what opportunities it may present, for the 2012/13 budget.
The latest monitoring position for the 2011/12 revenue budget indicates no worse than a break-even position,and potentially an underspend.
General reserves at 31st March 2012 are projected to be around £10.4m, which compares with the minimum risk assessment requirement of £8.750m, a desired level of £15.5m and the budgeted position of £9.4m.
Comparing the expected level of general reserves with the minimum suggests some room to make a contribution from reserves to the revenue budget in 2012/13. However, the use of reserves is a one-off measure that would need to be made good the following year, adding pressure to any savings target in 2013/14. It should also be considered against the underlying risks to the budget, which are set out in the following section.
3.2Assumptions and Risks
The key assumptions and risks that are inherent in the budget preparations at present are as follows :-
(a) Delivery of step-up savings
The basis of the budget information provided above is that all directorates will deliver fully their step-up savings requirements for 2012/13 that were outlined in their 2011/12 savings plans. Some directorates, notably Community Health and Social Care, Sustainable Regeneration and Environment and Community Safety have already reported to B & EG on the challenges they face, although the Group has instructed strategic directors to find ways to deliver the step-up savings required.
(b) Delivery of 2011/12 baseline savings in 2012/13
There remain some savings options that were accepted in 2011/12 where alternative one-off contingencies have been found in 2011/12 that reappear in the 2012/13 baseline and need to be delivered. These are generally savings of a corporate nature and include such as management structures, neighbourhood reform and welfare reform.
(c) Confirmation of spending assumptions
There are certain assumptions contained within the budget projection that remain to be confirmed and may change when these are finally known. Such matters include in particular the following :-
- Formula Grant settlement
Whilst we already know a provisional grant figure, which is incorporated into budget projections, there may be variations in grant distribution due to, for example, changes in taxbases nationally and/or possible funding for new academies. Provisional settlement figures are due to be announced shortly and these will be reported verbally to members should they be announced before this meeting.
- New Homes Bonus 2012/13
The assumed new bonus payable in 2012/13 is based upon data returned to CLG for the annual council taxbase, but remains to be confirmed by CLG.
- AGMA units and levies
The adjustment above regarding the transport levy assumes AGMA will approve no increase in the levy. Provision for increases in the waste levy and charges for other AGMA units is currently based upon last year’s estimates and may be subject to variation.
All assumptions underpinning the budget projection will be reviewed and, where necessary, refined in the light of emerging developments, but the above represent the main risks to spending assumptions at present.
(d) Council Tax Freeze Grant
For 2011/12, the Government offered local authorities a council tax freeze grant amounting to the equivalent of a 2.5% increase if the council tax levy was frozen at its 2010/11 level. The Government committed to make this grant a recurring specific grant and all local authorities accepted this offer from the Government.
For 2012/13,the Government has made a similar freeze grant offer of 2.5% but in this instance it will only be a one-off grant for 2012/13. This offer has implications for local authorities in that in 2013/14 they will need to either increase council tax by 2.5% to standstill or reduce its budget by an equivalent amount. Furthermore, legislation in the Localism Act will introduce the requirement for local referendums from 2013 where council tax increases are considered to be excessive. Consequently, some local authorities have already indicated they will not accept this offer. No decision has yet been taken for Salford.
(e)Public consultation
A report is contained elsewhere concerning the response to public consultation. This needs to be considered in formulating final budget proposals.
- CONCLUSIONS
The stage has been reached in the budget process where plans are nearing the final stages for determining the revenue budget for 2012/13. Final positions remain to be determined over several key assumptions as outlined above and there still remains the detail of the final set of savings options to be agreed. The outcome of public consultation also needs to be reflected upon in reaching final decisions.It is expected that these elements will be brought together during December and January and full details will be reported to a special meeting of Budget Scrutiny towards the end of January or early February as part of developing final budget proposals for reporting to Council in February.
JOHN SPINK
City Treasurer
R:\Scrutiny Support\Budget Scrutiny Committee\7th December 2011\Item 5 - 2012-13 Revenue Budget (2).doc